Police brought in to tackle bank scandal

National Australia Bank called in the Australian Federal Police last night to formally investigate the currency trading scandal that cost the bank up to $180 million.

The police will make an assessment before taking further action, although it is now increasingly likely that criminal charges will be laid against some or all of the four employees at the centre of the scandal.

NAB also revealed that its embattled chief executive, Frank Cicutto, will take charge of the bank's own investigation.

He is likely to hire the forensic accounting unit of a major accounting firm, probably PricewaterhouseCoopers, to assist in the inquiry.

As pressure mounted on both Mr Cicutto and the NAB board - which includes some of the country's most powerful businessmen - the bank's shares rebounded 41c to $30.46.

Mr Cicutto's move to take charge of the investigation came as analysts and investors expressed their discontent at the bank's explanation of the scandal and why it took so long to detect.

Asked if Mr Cicutto should stand down, Cliff Caldwell, of the Australian Shareholders Association, said: "He ought to, but I don't think he is."

NAB revealed on Tuesday that it was facing a $180 million loss before tax as a result of unauthorised currency trading by four foreign exchange dealers. It is believed the employees colluded in unauthorised internal trades in an attempt to conceal losses incurred last October.

The Treasurer, Peter Costello, distanced himself from the scandal yesterday, declaring it was up to the bank to get to the bottom of the rogue trading.

Mr Costello said it was important NAB conducted a thorough investigation. "Once the investigation is finished, if there are any breaches of the law, then the National Australia Bank must refer that to the relevant authorities to bring prosecution."

Other major banks moved to review their own foreign exchange businesses yesterday, but expressed confidence in internal monitoring procedures. The banks emphasised they had stricter daily trading- risk limits than NAB.

NAB briefed both the banking regulator, the Australian Prudential Regulation Authority, and the corporate watchdog, the Australian Securities and Investments Commission, on Tuesday after it discovered the rogue trading.

Mr Costello said APRA was involved in investigating whether NAB's internal control systems - in place to detect unauthorised trading - were adequate.

The APRA general manager responsible for supervising NAB, David Lewis, said the regulator would be investigating what actually happened, what weaknesses in the bank's internal control systems had enabled the rogue trading to occur, and how NAB's systems could be improved to ensure it did not happen again.

"Any bank is vulnerable to this sort of thing," Mr Lewis said. "The challenge is to make sure their systems are strong enough to withstand anything like this."

APRA will also investigate whether other employees were aware of the unauthorised trading before a whistleblower alerted NAB management to it on Monday.

ASIC's investigations will canvass whether the stock market was properly informed of the rogue trading.

The corporate regulator will also consider whether to ban from trading the NAB employees involved in the scandal.

A spokesman for NAB rejected any suggestion that the bank had not been totally forthcoming with the market.

"We have been exemplary in getting out initial details to the market, and what we will do as we go on, subject to any legal proceedings, will be to provide the market with further details as they become available in due course," he said.

A spokesman for the Australian Stock Exchange said the ASX had no intention of contacting companies to specifically alert them on the need to disclose any blowout in currency exposures or losses.

The spokesman said that under disclosure obligations, listed companies were already required to automatically reveal significant matters affecting profits.